A federal judge has refused to overturn a jury’s decision to
order Allstate to pay four fired investment portfolio analysts more than $27
million, saying the case showed there was “ample evidence” the company had ruined
the analysts’ careers by incorrectly reporting to federal regulators that pension
funds the analysts had helped manage had been shorted by fund managers seeking
to time trades to boost their own bonuses.
On Jan. 20, U.S. District Judge William T. Hart rejected the
motion by Northbrook-based Allstate to order a new trial or reduce the damages
the jury had ordered the insurance and financial services company to pay to
plaintiffs Daniel Rivera, Stephen Kensinger, Deborah Joy Meacock and Rebecca
A jury had entered a verdict on behalf of the plaintiffs in
June 2016, about six years after the four had filed their lawsuit in Chicago federal
court, accusing Allstate of firing them and then indirectly smearing their
reputations in public filings, making them all but unemployable in their chosen
The four were fired in December 2009 at the end of about six
months of investigations launched by “an anonymous report” brought to Allstate’s
chief risk and investment compliance office “that equity division employees
might be timing their trades to inflate their bonuses.”
According to court documents, the investigation, which
included an outside examination by a law firm hired by Allstate, focused on “an
algorithm called the ‘Dietz method’” which Allstate employed to help guide and
track portfolio performance. Court documents said that method was also used to
calculate the bonuses of security analysts’ bonuses, the employees Allstate
tasked with managing those portfolios.
While the investigation revealed trading activity could have
cost certain pension funds as much as $91 million, while earning the security
analysts bonuses of about $1.2 million, court documents said Allstate’s
analysis failed to account for other activity which offset much of those losses
and all but wiped out the allegedly improperly boosted bonuses.
After the security analysts were fired, in February 2010, Allstate
filed a public report, known as a 10-K, with the federal Securities and
Exchange Commission about the allegedly improper activity, and discussed the activity
in a memo to company employees. The filing and memo did not name the security analysts individually.
But Judge Hart in his ruling said the analysts did not need to be personally named for the implications to still rise to the level of defamation, as it was known who had been fired and who had conducted the allegedly suspect trades.
Following those disclosures, the fired security analysts
said executive recruiters refused to work with them any longer on finding new
employment, and their job prospects dried up.
At trial, jurors found the company had wronged the four
analysts, ordering Allstate to pay them more than $17 million in compensatory
damages, and an additional $10 million in punitive damages.
While Allstate argued those damages were excessive, Judge
The judge also ordered Allstate to pay $357,716 in attorney
fees to the plaintiffs’ lawyers, Robert D. Sweeney and Joanne H. Sweeney, of
RDS Law LLC, of Chicago.
Allstate was represented in the action by attorneys with the
firm of Seyfarth Shaw, of Chicago.